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Recognition versus disclosure: an investigation of the impact on equity risk using UK operating lease disclosures

Research output: Contribution to Journal/MagazineJournal articlepeer-review

<mark>Journal publication date</mark>11/2000
<mark>Journal</mark>Journal of Business Finance and Accounting
Issue number9&10
Number of pages40
Pages (from-to)1185-1224
Publication StatusPublished
<mark>Original language</mark>English


This study examines the equivalency of accounting recognition versus disclosure. OLS regression analysis is used to determine whether there is an association between equity risk and an adjustment to financial risk for off-balance sheet operating leases. Two methods of adjustment are considered: constructive capitalisation and a simple factor method. The observation of a reliably positive association suggests that UK investors/analysts view operating leases from a property rights perspective rather than an ownership perspective. This supports the argument for recognition of all lease rights and obligations ‘on-balance sheet’, as proposed in the recent G4+1 discussion paper ASB (1999).